Fear the Eagle Ford Boom Will Bust Preventing Housing Construction in Brush Country

posted by Jim Forsyth
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3 years ago

Finding suitable housing for workers in the Eagle Ford shale fields continues to be a problem, and is likely to remain one...for one reason. Builders of homes and other long term projects are not convinced that the fracking boom will last long enough to allow them to recoup their investment, 1200 WOAI's Michael Board reprots.

"Will it be fifteen years, twenty, or thirty?” Omar Garcia, who heads the South Texas energy and Economic Roundtable, told 1200 WOAI news.

While other oil boom related projects, like road construction, are moving along quickly, with a standard mortgage for thirty years, home builders are reluctant to move into the sparsely populated Brush Country for fear that the oil boom will dry up, leaving them with unsold homes in an area which is not likely to see any additional investment.

Garcia says housing is desperately needed in the sparsely populated areas where oil production is booming.

"With all the service companies, Halliburton, Weatherford, Baker Hughes...Halliburton alone will be employing some 1500 folks."

History would tend to judge on the side of caution. From Spindletop 110 years ago to the Permian Basin in the late 1970s, Texas is littered with the ghosts of abandoned oil rigs and support structures, and there are plenty of near ghost towns in west Texas where the hopes were once as high as they are now in the Brush Country.

When the seventies oil boom collapsed amid low prices in the mid 1980s, a common bumper sticker in Texas said it all: "Dear God, please give me another oil boom, and this time I promise not to blow it."

Garcia says as home builders hedge their bets, the big winner is the south side of San Antonio.

"Developers are starting to break ground in south San Antonio and in Corpus Christi," he said, saying that the home builders feel that if the Eagle Ford boom does go bust, those areas will continue to be a good market for home buyers.

But he says eventually, there will be some housing developments right where the oil is.

"There has been such a tremendous boom in the economy that I think they're finally starting to see that the numbers are starting to work."

The economics of shale oil fracking argue in favor of a long term play. What has killed previous oil booms in the long boom and bust history of the oil industry has been super low prices, which made new production techniques which are more expensive than drilling for relatively shallow Middle Eastern crude unprofitable.

But analysts say elevated prices for oil and gasoline this time are unlikely to vanish, because more and more oil is being produced and being discovered in non traditional areas, where drilling is more expensive, that is expected to place a 'floor' under oil prices which will prevent steep falls in prices like we last saw at the onset of the recession in 2008.